WINCHESTER — The Winchester School District has identified a six-figure budget deficit that it hopes to eliminate by the end of the coming fiscal year through a variety of means, including a $400,000 appropriation request on this year’s warrant.
The $745,402 deficit, which was confirmed last fall, developed over the past eight years and began because the district did not conduct annual financial audits between 2012 and 2016, Chairwoman Lindseigh Picard said.
As a result, the district overestimated the amount of money it had not spent in the budget at the end of those years, and returned more than it should have to residents in the form of reduced tax rates the following years.
“When you don’t have consistent audits, you’re basically using your most educated guess on what that final audit number is, and therefore, what that number will be carrying on to that next year’s [budget],” Picard said.
According to documents shared publicly by the district, Winchester over-returned an average of $109,413 per year to taxpayers from 2012 to 2019. In only one of those years, the 2014-15 fiscal year, the district ended with a positive balance in its general fund, according to audited figures.
“It’s very important to note the deficit is not the result of over-spending the budget,” Picard said. “The deficit is actually a result of over-returning money to the town, basically money to the taxpayer. So, over those years when there was no audit, the estimate went in favor, basically, of the Winchester taxpayer.”
This led to the $745,402 deficit as of June 30, 2020, which Picard said the district plans to eliminate by the end of the 2021-22 fiscal year. Voters will consider the budget for the coming year, in addition to the proposed $400,000 appropriation and other warrant articles, over the next few months.
Along with the $400,000 warrant article to offset part of the deficit, the school board voted following a public hearing on Jan. 5 to use $125,000 from the district’s Special Education Expendable Trust Fund to help pay down the deficit, according to the minutes of that meeting. The district anticipates being able to make up the remaining $220,402 using excess funds at the end of next fiscal year.
“When our audit is done next year, if we have a positive fund balance of anything over [$220,402], the deficit will be gone,” Superintendent Kenneth Dassau said.
It’s not uncommon for school districts to budget for the worst-case scenario and end their fiscal years with substantial surpluses — money that was budgeted, but not spent. Those are then appropriated to trust funds for specific purposes like special education or building renovations, or used to help offset taxes the following year.
If voters do not approve the $400,000 warrant article, the district will not be able to use its end-of-year surpluses to lower the tax rate until the deficit is eliminated.
“Whenever there’s money left on the bottom line, it will go back to the general fund versus returned to offset taxation in any way,” Picard said. “So, the general fund has to be repaid this deficit before we will see any ‘return’ from the school to offset any taxation.”
The district’s 2021-22 operating budget proposal is $12,353,376, a figure both the school board and budget committee recommend unanimously. The general fund deficit is equivalent to six percent of that budget. For the current fiscal year, the district’s operating budget is $11,270,000, a figure voters lowered by $1.6 million last year, causing the district to cut 23 jobs, reduce kindergarten to a half day and eliminate busing for high school students to Keene, among other cuts.
The Winchester district has one school, Winchester Elementary, which students attend through 8th grade. High-schoolers in the district attend Keene High School.
Both Picard and Dassau said they don’t know why audits were paused between 2012 and 2016, when neither of them were affiliated with the district. The gap in audits came shortly after N.H. School Administrative Unit 38 — which provided top-level administrative services for the Winchester, Hinsdale and Monadnock Regional school districts — dissolved in 2010, and Winchester formed its own unit, SAU 94.
Dassau, a former SAU 38 superintendent, held that role with the Winchester School District until resigning in 2012. Around that time, he said, district administrators and the school board were looking for a new auditor.
“I think they were seeking another auditor, and they never found one,” Dassau said.
Picard said she does not believe the district deliberately failed to conduct these annual audits.
“I don’t think, ultimately, it was anything malicious or intentional,” she said. “I don’t ever think that somebody purposefully doesn’t do the job they’re tasked to do, right? But ultimately, it didn’t get done, and it should have.”
School districts are legally required to conduct annual audits, according James Gerry, director of the municipal and property division at the N.H. Department of Revenue Administration.
“If you don’t have an audit within that year, you’re in violation of [the statute that requires audits],” Gerry said. “... There’s no penalty for that, but they have to get in compliance, which is what it looks [the Winchester School District] tried to do through catch-up.”
The district resumed annual audits in 2016, Picard said, when the district also began retroactively auditing the missing years. According to documents posted on the district’s website, audits for the fiscal years ending in 2012-2016 were completed in 2017.
It wasn’t until the 2017-18 fiscal year that the district’s business administrator began to notice some revenue shortfalls related to the deficit, Picard said. The audit for the following year, which was completed in October 2020, confirmed the deficit, leading the district to address it by proposing the warrant article and transfer from the special education trust fund, she added.
The Winchester School District deliberative session, where voters can discuss and amend articles before voting them up or down at the polls, was originally scheduled for Jan. 30, but the school board voted last month to postpone the annual meeting to April 10 due to COVID-19 concerns. Residents will vote on the warrant May 11.